On Tuesday, the AUD/USD pair approached the boundaries of the 0.66 area. Examining the W1 timeframe, we observe that the AUD/USD pair has been rising for the second consecutive week, driven by growing demand for risk assets and the overall decline in the U.S. dollar. For comparison, just last week, the Aussie updated a multi-week low, touching 0.6355 (the middle line of the Bollinger Bands indicator on the weekly chart), whereas Tuesday's high has reached 0.6593. A nearly 250-pip rally in just a few days is an impressive result for a typically sluggish pair like AUD/USD.

It's worth noting that the driving force behind this growth is the U.S. dollar, which is under intense pressure across the board. The U.S. Dollar Index has already tested the 95.00 area on Tuesday (for the first time since February 2022), reflecting the broader weakness of the greenback. The Australian dollar, in this case, plays a secondary role, as its fundamental backdrop is somewhat bearish. For instance, monthly inflation in Australia slowed for the first time in six months (to 2.1%, the lowest since October last year), and the labor market data disappointed (unemployment remained at 4.1%, and employment unexpectedly fell by 2.5k). Previously, Q1 GDP data showed weak growth, with the economy expanding by just 0.2% QoQ, compared to 0.6% QoQ in the previous quarter.

Despite this one-sided fundamental backdrop, the Aussie feels more than confident against the U.S. dollar. This means that the further trajectory of the AUD/USD's upward trend depends solely on the performance of the US dollar. At least until July 8, when the Reserve Bank of Australia is scheduled to hold its next meeting, the Australian dollar will largely follow the quoted currency.

Why Is the U.S. Dollar Declining? Due to a combination of fundamental factors, growing concerns about U.S. debt resurfaced after Donald Trump's legislative proposal passed a crucial procedural stage in the Senate. If the Senate approves the bill (after debates and amendments) and the House supports the revised version, it will be sent to Trump for signing—becoming law, with all its implications (including an increased federal deficit, concerns over long-term economic stability, and revised expectations for the Federal Reserve rate).

Second, Trump's latest remarks about Jerome Powell have put additional pressure on the dollar. The U.S. President called the Fed Chair a "total idiot" and threatened to dismiss him prematurely (despite the Supreme Court's ruling that the President cannot fire the Fed Chair over policy disagreements). Trump even sent Powell a handwritten note urging a rate cut (a copy of which was shown at the White House).

The very fact that the President is exerting political pressure on the Fed is already a negative factor for the dollar. Additionally, Powell will be required to step down in 10 months, when his term expires. His successor (whoever it may be) will likely be more "compliant," initially sharing Trump's views.

Third and fourth factors hurting the dollar: Growing dovish sentiment in the market (95% probability of a Fed rate cut in September). Uncertainty regarding U.S. tariff policy ahead of the end of the "grace period." Trump has stated he will not extend the tariff pause (a three-month period during which a uniform 10% tariff was applied instead of individualized rates). Instead, he promised to send "ultimatum letters" to trade partners, consisting of two points: (1) the specific tariff rate and (2) the proposed trade deal. The proposal will be framed as a take-it-or-leave-it offer.

All of these fundamental developments are working against the U.S. dollar, which is under immense pressure—not only in the short term, but over a broader timeframe: the dollar has declined by more than 10% in six months, marking its worst half-year start in the last 50 years.

It's no surprise that AUD/USD traders have been ignoring Australian macroeconomic data—the greenback remains the guiding star, dictating the pair's upward direction.

The technical picture confirms this. On the daily chart, the pair is on the upper Bollinger Bands line, testing the resistance level at 0.6580. It makes sense to consider long positions either on pullbacks or once buyers firmly establish themselves above the 0.6580 target. The next bullish target is 0.6650, which aligns with the upper line of the Bollinger Bands on the weekly chart.